Let’s Talk About: Trade with China

The current U.S. trade dispute with China is frustrating for rural America. Standing up to China is taking a toll on the U.S. agriculture industry, and the costs are great.

Top U.S. agricultural exports to China include soybeans, cotton, sorghum and pork. China buys 57 percent of the soybeans, 17 percent of the cotton, 81 percent of the sorghum and 5 percent of the pork exported from the United States. America and American farmers cannot afford to lose this market.

Demographics on China

The CIA World Factbook provides the following Chinese demographic data:

The U.S. has a 27.5 percent share of the world’s gross domestic product (GDP), with only 5 percent of the world’s population

China has 14.7 percent of the world’s GDP, with 20 percent of the world’s population

U.S. trade with China

As a major world power, China is the United States' third-largest export market. Similarly, the U.S. depends heavily on China for imports, and is China’s largest export market. The U.S. has a $385 billion trade deficit with China.

The U.S. relies on China for labor-intensive, everyday goods, while China relies on the U.S. for land-intensive raw products.

Despite the trade deficit, trading with China still benefits the U.S. economy. The U.S.-China trade relationship supports roughly 2.6 million jobs in the U.S. According to the U.S.-China Business Council, U.S. exports to China are expected to rise by more than $520 billion by 2030.

With China’s growing population, the United States should be seeing China as an opportunity and not an enemy.

China and U.S. agriculture

In 2017, China imported 16 percent, or $22.5 billion worth, of the United States' $140.5 billion in agricultural exports.

China has been the U.S.’s top agricultural export market outside of NAFTA since 2009. This trade relationship provides a demand for commodities such as soybeans, cotton, hides and skins, fish, dairy, sorghum, wheat and pork. Without China as a trade partner, American farmers' prices and farm income would be down. Moreover, the price of consumer goods sold in the U.S. would increase.

In late 2017, trade tensions between the Trump Administration and China escalated. In the resulting tit-for-tat trade threats, China targeted agriculture. Among the 134-item tariff list, 94 are agricultural in nature. Major agricultural products placed on this list to face a minimum 25 percent tariff include soybeans, sorghum, distiller’s dried grains with solubles (DDGS), beef, cotton and others. Pork faces a tariff of more than 50 percent. Many of these commodities are heavily reliant on China trade, particularly soybeans.

China and Illinois agriculture

Because of our river system, Illinois exports more of its agricultural products than other Midwest states. China is Illinois’ largest export partner, accounting for 25 percent of all Illinois agriculture exports. In addition to investing in Illinois agricultural products, China also invests in the Illinois economy. Chinese firms employ 4,232 Illinoisans at 116 different locations in Illinois and is the 16th-largest foreign direct-investment partner by employment.

Because China has a large presence in Illinois, damaging the U.S.-China trade relationship will be a major setback for Illinois agriculture. Because Illinois produces three out of the top four commodities exported to China, Illinois will be especially impacted by the tariffs. These products are soybeans, sorghum and pork. In fact, 30 percent of all Illinois soybean exports go to China, and 93 percent of all Illinois sorghum exports go to China.

Once U.S. loses China as a trading partner, the relationship may never be repaired. The U.S.-China relationship is one that Illinois cannot afford to lose.